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About this blog: I grew up in Los Angeles and moved to the area in 1963 when I started graduate school at Stanford. Nancy and I were married in 1977 and we lived for nearly 30 years in the Duveneck school area. Our children went to Paly. We moved ... (More)

About this blog: I grew up in Los Angeles and moved to the area in 1963 when I started graduate school at Stanford. Nancy and I were married in 1977 and we lived for nearly 30 years in the Duveneck school area. Our children went to Paly. We moved downtown in 2006 and enjoy being able to walk to activities. I do not drive and being downtown where I work and close to the CalTrain station and downtown amenities makes my life more independent. I have worked all my life as an economist focusing on the California economy. My work centers around two main activities. The first is helping regional planning agencies such as ABAG understand their long-term growth outlook. I do this for several regional planning agencies in northern, southern and central coast California. My other main activity is studying workforce trends and policy implications both as a professional and as a volunteer member of the NOVA (Silicon Valley) and state workforce boards. The title of the blog is Invest and Innovate and that is what I believe is the imperative for our local area, region, state and nation. That includes investing in people, in infrastructure and in making our communities great places to live and work. I served on the recent Palo Alto Infrastructure Commission. I also believe that our local and state economy benefits from being a welcoming community, which mostly we are a leader in, for people of all religions, sexual preferences and places of birth. (Hide)

Infrastructure Commission Findings and Recommendations

Uploaded: Dec 23, 2011

For the past year my 16 colleagues and I addressed the request of the City Council "to provide a recommendation to the City Council on infrastructure needs, priorities, projects and associated funding mechanisms to the infrastructure backlog and future needs." I encourage other commission members to join this discussion and share their thoughts.

A complete list of our members, meetings and final report can be found on the City's website at

@ James: making cuts to other city programs was not in the scope of this commission. As Steve said in the final sentence of his blog post above, Council and residents may choose to reallocate current funding. The IBRC was tasked (1) to identify the need and (2) to figure out how to pay for it without defunding other expenditures.

@ Walter: you may have misunderstood Steve's post. Yes, there is $41 million in "catch-up" needs, which includes deferred maintenance. I encourage you and everyone else to read the entire report, or at least the 24 page summary.

I would also like to note that the IBRC employed a relatively novel tool that I have not personally seen in other city reports. There are a series of both dissents (for those commissioners who held a minority opinion) and commentaries (for those commissioners who elected to offer additional opinions than the entire commission did not necessarily embrace).

Posted by Peter Carpenter,
a resident of ,
on Dec 24, 2011 at 11:15 amPeter Carpenter is a registered user.

Every public agency should have and fully fund reserves which are equal to the depreciation (the allocation of the cost of assets to periods in which the assets are used) of its physical assets so that the funds are available when the time comes to replace those facilities.

"James: making cuts to other city programs was not in the scope of this commission"

Alex,

Yes, that is my point. If the commission was tasked with finding funding, then ALL options hould have been on the table. Of course, that was not the point, was it? The only acceptable recommendation from the commission would be new taxes, not cuts to any existing programs. The City already knew about its infrastructure needs and backlogs. This study is a thinly veiled attempt to raise more taxes, and to give cover to the city council as it attempts to do so. Nothing more....

I would wholeheartedly agree with your approach IF the original assets had been financed from cash reserves. However, they were not. The original assets were financed through bond measures. Adding a depreciation reserve to annual bond servicing would have the effect of forcing then-current citizens of paying for an existing facility AND a future facility. This hardly seems fair.

To simplify my point, let's use the example of a car. If I purchase a car using cash savings, then yes I should save an appropriate amount of money so that when my car needs to be replaced, I can again pay cash. However, if I finance the car, then it may not make sense for me to pay monthly payments on my existing car AND save for a new car, especially if that new car will benefit someone else who did not contribute to the car in the first place! Not a perfect analogy, but I think you can grasp the concept I am trying to convey.

However, there is a hybrid approach. If a physical asset, such as a new Public Safety Building, outlives its original financing mechanism, we should maintain the level of annual bond servicing (but instead of going to bondholders, it would go to a reserve).

The IBRC has adopted this approach in aggregate by recommending both a minimum infrastructure funding level (expressed as a % of General Fund budget) AND two independent infrastructure reserves.

I encourage all Palo Alto citizens to read the entire report and not only the summary articles in the Post, Daily, and Weekly.

Yes, I absolutely save money for repairs and maintenance...in fact, I am very diligent about my car's servicing needs.

There is a difference between operating maintenance and capital replacement. I was specifically referring to the capital replacement aspect.

There has indeed been an operating maintenance deficit, no doubt. This is why the IBRC has recommended a minimum funding level going forward to ensure that all maintenance is performed when needed and not deferred.

Posted by Peter Carpenter,
a resident of ,
on Dec 24, 2011 at 1:21 pmPeter Carpenter is a registered user.

Alex - your bond approach, instead of funding depreciation as it occurs, assumes that you will always be able to finacne the replacement buildings/facilities with another bond. Given the projected deficits of the City future bond issues may be very problematic - just like financing your next car when you have very poor credit.

Recognize that your bond financing means that the proper savings were not accumulated before the existing facilities were built. Kicking the can down the road is poor public policy.

"There is a difference between operating maintenance and capital replacement"

The capital cost of new streets/curbs/sewers was paid many decades ago, in Palo Alto. We have lousy streets, and other crumbling infrastructure, because we did not pay to keep them repaired and upgraded, as needed. We spent the money on high salaries and benefits and flavor-of-the-week programs. It is time to cut salaries and benefits, and to eliminate the flavors.

I had dinner with a college buddy a couple weeks back, who is working on the Hetch Hetchy rebuild project.

We walked from my place in Community Center to downtown, and came back to my place where his truck was parked.

My friend has been involved in all sorts of public infrasturce projects during his career.

We traversed numerous sidewalks in the dark on the way back, which had tree roots creating major walking hazards, as the roots have created such uneven walking surfaces. We love our trees here in PA, and we need a "sidewalk plan" to deal with the natural growth and fix the sidewalks all over town to get them back to a safe condition.

"We traversed numerous sidewalks in the dark on the way back, which had tree roots creating major walking hazards, as the roots have created such uneven walking surfaces."

Paul,

About 3-4 years ago, a woman was killed when she tripped over a raised sidewalk in PA. It did not make a lot of news, but it happened.

Sidewalk repair is not sexy, but it is an essential maintenance issue. Vic Ojakian is one of the few recent council members who pushed for such pedestrian efforts, and gave it a priority over the flavors-of-the-week stuff.

We do not need new taxes. We need our city leaders to prioritize current revenues for essential needs. It is long overdue. Do you agree, Paul?

This town is 100+ years old, and in both the City and the School district, there have not been adequate maintenance or improvements to keep our infrastructure in good shape.

There have been some bond initiative passed to make a number of improvements, namely the storm drain effort, the library project, and two major school district proposals. I am of the opinion that Palo Altans voted in favor of these because there was a recognition that there had been many years of neglect, and we needed to deal with these matters if Palo Alto was going to maintain itself as a highly desirable place to live. "We get what we pay for."

AS for future priorities and how to pay for them, that is a conversation that this group was addressing. You may be right that the spending priorities need re-alignment. My experience with our City government in my capacity on the Parks and Recreation Commission is that this is a topic of constant discussion. There are different "buckets" of money that can be used for different projects--it is more complicated than I would like, but it is what it is, not just in Palo Alto, but cities statewide.

For example, building a reservoir at El Camino Park, and the improvements for recreation that will come with the project, cannot have the funds paying for it to fix sidewalks. BTW, how would a composting facility be paid for?

I don't like getting into polemics about taxes. It is touching a third rail. I will observe that the company I have owned in Fremont since 2004 has a higher sales tax rate than does Palo Alto. Fremont is a well run city and in good physical condition. I also get dinged now and again by Fremont for some fire inspectors coming by to make sure my operation is in compliance with the local requirement, and then they graciously send me a bill for their time.

There are some things that we in Palo Alto can choose, and some that we cannot. What is important is our City Council, City Staff and involved community members reach an understanding of how the discretionary expenditures should be focused, and if the community prefers to continue deferring certain projects since there is a lack of revenue, or if it prefers to look into revenue streams that can help pay for things that create the kind of community many of us have enjoyed for a number of years.

"if the community prefers to continue deferring certain projects since there is a lack of revenue"

Paul,

That is the crux of the issue. However, you state it inversely. It is not a lack of revenue, it is a choice of priorities.

Which current programs would you cut, Paul, in order to provide for the maintenance backlog, given that PA has refused to stand up to the plate, and do their job? I am not asking you about about new revenue sources, I am asking about which current programs need to be cut in order to make up for past mistakes.

Paul, I agree with James on this - what you call a lack of revenue is just a matter of priorities and choices. For instance, we pay $1.3M for Children's Theater. I like the PACT, fine program. But that's way way more per capita than any children's theater program in America (believe me, I've looked into it). So if we reduced that from $1.3M to $0.3M, that's a meaningful amount to put toward infrastructure projects.

Our number one source of additional funds for infrastructure projects is the revenue we already have. That's not an ideological perspective, it is just common sense. Rather than go to war for added taxes, let's shift some costs to those who choose to pay for desired programs.

Posted by stephen levy,
a resident of ,
on Dec 26, 2011 at 1:18 pmstephen levy is a registered user.

As Paul Losch pointed out the Commission's work focused on spewnding choices (what infrastrcuture investments are recommended) and financing choices (how to pay for these investments.

On the spending side the Commission identified two large projects, some addition to annual keep up funding and a set of catch up projects and smaller bew projects.

The reasons for these infrastructure investments are described in detail in the report with a recommendation to proceed immediately on the public safety facilities and a series of recommendations for consideration in the upcoming study of the MSC.

So far most of the posts have been about financing options and not about the Commission's investment and maintenance recommendations.

For the two major facilities projects the Commission recommends long-term borrowing. Regardless of how the borrowing is paid for these projects require significant up front financing AND the beneifts will occur to residents for many years into the future. Borrowing and having both current and future residents pay for these investments is the normal process for financing long-term investments.

We describe three options for funding and repaying these long-term borrowings. One is General Obligation bonds such as we have used in Palo Alto and other communities recently for school and library construction. The advantages of GO bonds is that voters have a say in project selection (something that most posters have argued for) and GO bonds are usually the cheapest source of long-terrm borrowing. Finally, GO bonds bring with them a small increase in property taxes so they are fully paid for.

Certificates of participation (COPs) are borrowing by the City that require a repayment source and do not require a vote by residents.

COPS can be repaid by a new revenue source such as a sales tax increase or by other revenues such as reductions in existing City spending (advovcated by mnay posters) or by the use of savings if the Cubberley lease is not renewed. A thrid option but only for the MSC is a Utilty Revenue bond paid for by a sall (1-2%) increase in rates.

As I mentioned before our Commission did not recommend specific reallocations of existing spending although our report makes clear this is an option and one that I am sure will be heard as the Council deliberates.

But the first priority is to see if there is support in the community for moving ahead on replacing the public dsafety building, firehouses and MSC.

Posters in response to the report recommendations have suggested spending priorities that they would like discarded to make room for infrastrcuture investment.

They are repeating the dilemma of many federal budget debates. So recently we have both parties saying they support an extension of the payroll tax but then they get gridlocked on how to pay for it.

Similarly we seem to have broad agreement in this small sample of opinion for more infrastructure investment and reluctance to pay for it except by reducing spending they don't like as much.

I am pretty certain that there are other residents who will have a different set of priorities. The complaint that elected officials do not listen to residents and pick choices that are ill-advised (from the perspective of the speaker or poster) is not unique to the Weekly Town Square or usually helpful in resolving difficult public policy choices. But our process was open and transparent with a long public record for revieew and I am sure the Council will hear a variety of opinions as they deliberate on our recommendations.

There will be plenty of time for residents and the Council to express and discuss alternative approaches to paying for these investments that the Commission members, usually unanimously, think are critical for our quality of life and attrractiveness as a place to live and work.

In a later post I will discuss our recommendations for annual funding for keep up maintenance and to fund (over the next 20 years) the catch up (deferred) projectds identified by the Commission and smaller future capital investments.

The Commission recommeded funding of two new reserves as the current reserve is about to be out of funds and I will discuss these also in a later post.

Posted by Walter_E_Wallis,
a resident of ,
on Dec 26, 2011 at 1:36 pmWalter_E_Wallis is a registered user.

A drunken sailor has spent his own money.
Palo Alto should not spend one dime for discretionary items until maintenance and operation are fully funded.
I have maintained from the start of my residency 40 years ago that Palo Alto should be reduced to a municipal service district with clearly defined duties. That is still my recommendation.

This is one of the most reasoned thread I have ever read. It seems all recognize and want to solve the deferred maintenance problems without agreeing on the methods.

In addition is the need for a Public Safety building and rebuilding or replacing MSC and two fire houses. Tell the Council there must be NO more flavor-of-the-week until issues defined by the IBRC are settled.

I am cautiously optimistic that all the posters and residents will face the issues squarely and not draw up battle lines to protect their pets. Whose ox is being gored must not be part of the dialog.

Steven, thanks for pointing out that ?Our mission was to develop funding options that did not involve taking money from other city priorities.?

I agree with James and Me Too: this is ?a matter of priorities and choices.?

Palo Alto suffers from the delusion that it can have it ALL ? the police building AND the Children?s Theatre. But priorities, by their very nature, demand either/or choices.

Paul, you say that there are ?different ?buckets? of money that can be used for different projects?...? That may be the way the city/staff has set things up, but it doesn?t have to be that way and should not be that way.

Consider a business that can?t meet demand. The exec staff might pull money from the advertising bucket and put it in the engineering/manufacturing bucket.

In any case, all the city?s buckets are filled from the same source: our wallets.

Let me give you an example of what I am talking about. When a new building is completed (Alma Plaza, for exxample) the developer must pay a percentage of the cost of the building to the City's Capital Improvement Project fund. This true all over the state, not just here. The reason it isbe funds set up this way is to make sure that there will be funds available to either acquire additioinal land for public use or make improvement, such playgrounds. These funds must be used for Capital Improvements, and cannot be diversted for operating purposed.

Posted by stephen levy,
a resident of ,
on Dec 28, 2011 at 10:30 amstephen levy is a registered user.

Posters on this blog and the other infrastructure thread have been discussing how to make infrastructure funding a priority in Palo Alto. The Commission wrestled with these issues and decided upon four approaches.

First is a recommendation that the city allocate approximately 23% of annual revenue to fund annual maintenance and provide funds to cover catch up or deferred infratructure projects plus the smaller future projects identified by the Commission. The 23% figure was determined by looking at current spending levels and the additional annual infrastructure spending recommended by the Commission.

Second, the commission recommends creation of a reserve fund to handle fluctuations in annual infrastructure spending. In years when 23% is not needed, the extra funds would be put in a reserve for years when more than 23% is needed. This would allow the funds recommended for infrastructure to be kept in reserve and not reallocated to other uses.

Third, the Commission identified two approaches to making infrastructure a priority within city staff and council deliberations. One is to have a special infrastructure position within existing staff that reports to the City Manager. The other, and council can choose either or both, is to have a city infrastructure commission. The majority of members liked the commission idea but several members thought a new commission was not necessary and that other approaches to insure citizen input could be developed.

Finally, the Commission recommends creation of a second infrastructure reserve to accumulate funds for projects in the future. Initial funding could come from the infrastructure funds provided by Stanford for city use as part of the hospital expansion. Funds could also come from sale or lease of city property such as the site of the existing police building if a new facility is built elsewhere.

Stephen, the last thing the city needs is another highly-paid member of the executive staff. Keene has an assistant city manager/COO in Pamela Antil, a deputy city manager in Steve Emslie, and an assistant for sustainability in Debra van Duynhoven. The structure is in danger of collapsing from being top heavy.

Any well-run organization has the top priorities in mind as it goes about its normal business, making decisions and allocating resources. The problem with Palo Alto is that it has too many ?priorities,? most of which are non-essential. One day it?s civic engagement, next it?s youth well-being.

If the city council could once and for all clearly articulate the real priorities that are obvious to anyone running a city, we wouldn?t be facing this financial dilemma and we would not have needed an infrastructure commission.

No one at city hall should need your commission to identify ?two approaches to making infrastructure a priority within city staff and council deliberations.? That should be common sense!!!!! Tragically, unbelievably, it has never been so.

This one is a real laugher! We have had such reserve funds in the past, but they got spent on various flavors of the week. Salivating council members, dreaming about bike lanes, low cost housing, "sustainability", theatre productions, consultants, union support, etc., will dry up any potential reserve fund...no problem.

Posted by stephen levy,
a resident of ,
on Jan 11, 2012 at 10:35 amstephen levy is a registered user.

Next Tuesday the infrastructure commission will have a study session with the Palo Alto city council.

I want to take this opportunity to publicly thank the 16 commissioners I was privileged to serve with. Together these commissioners volunteered over 10,000 hours over a fifteen month period to our community.

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